Monday, 28 July 2014
Last updated 35 min ago
Apr 8 2010 | 3:59am ET
Convicted hedge fund fraudster Thomas Petters faces the music today, learning if he’ll spend the rest of his life in prison for perpetrating a $3.65 billion Ponzi scheme.
Petters, who was convicted of 20 counts of fraud and money laundering in December, faces up to 335 years in prison—more than twice the sentence received by fellow Ponzi schemer Bernard Madoff. Prosecutors have asked U.S. District Judge Richard Kyle to impose the full tariff; Petters’ own lawyers have countered with four years for the 52-year-old.
“The defendant’s fraud is beyond comprehension in size and scope,” prosecutors wrote in seeking the three-century sentence. “The offense is the largest fraud in the history of Minnesota. Indeed, there are only a handful of fraud schemes that are even comparable in the history of the United States.”
Petter’s fraud, which came to light just months before the much larger Madoff scam collapsed, involved selling bogus notes linked to consumer electronics sales which prosecutors say never actually happened. Investors in Petters Co. were told they were buying bulk electronics which were being resold to big-box retailers.
At least 20 hedge funds were the chief victims of the scheme, according to the complaint, and at least one allegedly helped Petters cover up his scam. In October, Lancelot Investment Management founder Gregory Bell pleaded guilty to mail fraud, admitting he co-engineered a series of bogus “roundtrip” transactions with Petters designed to hide losses and keep the Ponzi scheme afloat.
Petters, whose business empire once also included Polaroid Corp. and Sun Country Airlines, claimed the fraud was orchestrated by his underlings without his knowledge. He plans to appeal his conviction, but Kyle doesn’t expect him to succeed.
“Dozens of witnesses testified against defendant, including high-level co-conspirators implicating him in the fraud, and the government introduced thousands of documents, tape-recorded conversations, and e-mails undermining his contention that he was unaware of what was occurring,” the judge wrote.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…